1. 30th Annual Visitors Industry Outlook Conference ECONOMIC OUTLOOK
October 25, 2018

2. Outline US Economy State Economy So Cal Economy
Visitors Industry –Background Trends
Conclusion

3. Outlook Highlights Overall: US, CA, Southern California
Slower, constrained growth, full employment
Underperforming housing market
National Economy
Tax Cuts/Budget Deficit-mixed effects
Financial Markets – affected by Fiscal and Monetary Policy
State and Local Economy
Among leading states for growth, So Cal among CA’s leading regions

4. US Economy

5. Contributions to Change in GDP
10/25/18
GDP 2017: 2.2% | 2018: 3.1% | 2019: 2.6 to 3.0%
Contributions to Change in GDP
Sector
2016
2017
2018.H1
Consumer
1.9
1.7
Investment
-0.2
0.8
0.9
Net exports
-0.3
Government
0.2
-0.01
Total GDP % Chg.
1.6
2.2
2.7*
Chart – updated rak
Table – Updated rak
Source: GDP Chart: BEA Table Annual; Table: BEA Table (Annual Contributions to GDP)
* Does not add up due to rounding
Source: BEA

6. Real Disposable Personal Income Growth
10/25/18
Real Disposable Personal Income Growth
RAK 9/27/18
Source: BEA

7. Lower Saving Rate, Houshold Leverage Good, No Debt Overhang…
10/25/18
Lower Saving Rate, Houshold Leverage Good, No Debt Overhang…
Rak 9/27/18
LEFT: FRED/Personal Saving Rate (PSAVERT)
RIGHT: FRED/Debt Serice as % of DPI (TDSP)
Source: Federal Reserve Board of St. Louis

8. U.S. Outlook 2019 GDP: ~+2.5 to +3% Labor Market:
U-rate under 4% = full-employment
Modest slowdown in job growth
Inflation: rising but not a threat
Interest Rates: rising for the “right” reasons
Worries:
Trade policy and uncertainty
Budget deficit

9. California

10. CA & US at Full Employment
10/25/18
CA & US at Full Employment
*UPDATED
Updated 10/21/2018 rak
Updated 7/10/2018 – RN
(U3 Unemployment)- CA up to May 2018 (data is lagged). (National has June 2018 numbers, but May number (3.8% displayed) to match CA may number)
Source: California Employment Development Department

11. YTY % Change Jobs by State (Aug-18)
10/25/18
YTY % Change Jobs by State (Aug-18)
09/25/2018
Source:
California 11th fastest growth rate among states at 2.1%
TX 3.2
FL 2.6
NY 0.9
IL 0.8
Source: Bureau of Labor Statistics

12. CA Outlook 2019 Gross State Product: Labor Market: Worries:
World’s 5th largest economy
Labor Market:
U-rate record low = full-employment
Modest slowdown in job growth
Outsized contribution to U.S. job growth
Worries:
Housing costs
Budget crisis in next downturn

13. Southern California Economy

14. Unemployment Rates 10/25/18 Update the most recent month for SB County
Source: California EDD

15. Job Gains Across So Cal Metro Area YTY LA County 64,400
Riverside-San Bernardino-Ontario MSA
51,100
San Jose-Sunnyvale-Santa Clara MSA
42,000
San Diego-Carlsbad MSA
23,900
San Francisco Metro Div
23,200
Oakland-Hayward-Berkeley Metro Div
21,300
Sacramento—Roseville MSA
16,300
Anaheim-Santa Ana-Irvine Metro Div
13,100
Fresno MSA
10,600
Stockton-Lodi MSA
7,100
Bakersfield MSA
6,700
Santa Rosa MSA
5,500
Source: EDD, Compiled by UCR

16. Industry Job Changes, Aug. 2018 (YTY % Chg.)
10/25/18
Industry Job Changes, Aug (YTY % Chg.)
Source: EDD

17. Industry Job Changes, Aug. 2018 (YTY % Chg.)
10/25/18
Industry Job Changes, Aug (YTY % Chg.)
Source: EDD

18. San Bernardino County Median Earnings (25+ Yrs)
10/25/18
Worker Incomes Rising
San Bernardino County Median Earnings (25+ Yrs)
2012
2017
% Change
All Workers 25+ Yrs
$32,050
$36,684
14.5%
Less than high school
$20,457
$23,642
15.6%
High School diploma
$28,298
$30,663
8.4%
Some college
$35,145
$36,977
5.2% BA
$49,528
$53,264
7.5%
Graduate degree
$68,281
$75,241
10.2%
2012 and 2017 with five year change from the ACS
Source: ACS

19. So Cal Home Prices & Sales
10/25/18
So Cal Home Prices & Sales
County
Q2-17
Q2-18
YTY % Change Price
YTY % Change Sales
Los Angeles
$574,500
$623,800
8.6%
-4.6%
Orange
$735,400
$774,700
5.3%
-5.9%
Riverside
$353,900
$374,600
5.9%
-6.2%
San Bernardino
$288,800
$309,700
7.2%
-5.1%
San Diego
$573,700
$607,100
5.8%
-8.0%
Ventura
$605,200
$636,400
5.2%
-9.6%
RIV CO ~8% SHORT OF PEAK
Source: DataQuick

20. Apartments Location Q2-18 YoY Change Bakersfield $980 2.4%
10/25/18
Apartments
Location
Q2-18
YoY Change
Bakersfield
$980
2.4%
Inland Empire
$1,334
2.8%
Los Angeles (MD)
$1,940
4.6%
Orange County (MD)
$1,939
5.7%
San Diego
$1,766
3.6%
Ventura
$1,736
2.1%
REIS Quarterly Data Needed for LA County
Source: REIS

21. Population Forecast…More Older CA Residents
CA Age Forecasts
Age
2010
2015
2020
2025
2030
2035
0-19
26.4%
25.2%
24.2%
23.2%
22.0%
21.0%
19-24
9.0%
9.3%
8.7%
8.4%
25-64
53.1%
52.1%
51.1%
49.8%
48.7%
48.3%
65+
11.5%
13.4%
15.8%
18.3%
20.6%
22.3%
Total
100.0%
Source: DOF, Compiled by UCR

22. Visitor Industry – Background Trends

23. So Cal Leisure & Hospitality Employment
10/25/18
So Cal Leisure & Hospitality Employment
Source: EDD, Beacon Economics

24. Hospitality-Leading Traded Industry Cluster

25. Local Hospitality–Traded Cluster Synergies

26. Job Opening Rates by Industry, US (Sept.’18)
10/25/18
Job Opening Rates by Industry, US (Sept.’18)
Source: Bureau of Labor Statistics

27. Conclusion

28. Conclusion US & CA: growth steady, full-employment
Must monitor trade, monetary policy
Leading Industries: health care, construction, leisure and hospitality, logistics
Real Estate: MORE SUPPLY needed
Record-long expansion in sight for 2019

29. Thank You! robert@beaconecon.com (310) 571-3399
10/25/18
Thank You!
(310)
Beacon Economics, LLC 5777 W. Century Blvd. Suite 895
Los Angeles, CA 90045